Higher payout a gift for farmers

PAYOFF: An increase in the interim milk payout will result in an extra $76,926 for the average South Canterbury dairy farmer.

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South Canterbury dairy farmers received a welcome early Christmas present from Fonterra after the dairy company lifted its payout forecast by 25 cents for the 2012-2013 season.

The new payout range is $5.90-$6 per kilogram of milk solids for a fully shared farmer and meant an extra $76,926 for the average South Canterbury dairy farmer with a 779 herd, milking 395kg milk solids per cow.

The lift would also inject an extra $19 million into the South Canterbury economy.

"Farmers had probably resigned themselves to not be getting a lift in the payout at this stage in the season. It's a real surprise.

"It won't send us rushing to tractor dealerships or car dealerships, but there are a lot of cashflows under pressure and it's going to alleviate that and it makes it a bit more positive for the rest of the season."

Fonterra's board also lifted the farmgate milk price to $5.50 per kilogram of milk solids and increased the advanced rate payment to farmers by 40 cents.

Mr O'Sullivan said: "That's really key because farmers were only receiving $3.85/kg milk solids for the milk they supply on a monthly basis. That 40 cent lift will take it to $4.25 and it will be retrospective for all the milk we have supplied for the season."

Dairy farmers were approaching the half-way mark in the season and the new forecast meant a 40 cent retrospective top-up for all the milk Fonterra farmers have supplied for the season, Mr O'Sullivan said.

The Fonterra board also announced a forecast net profit after tax range of 40-50 cents per share, consistent with the recent Fonterra Shareholders' Fund offer prospectus.

Fonterra's strong balance sheet meant the co-operative was in a position to increase payments to farmers over the next few months without any significant risk to its financial stability, Fonterra chief executive Theo Spierings said.

The impact of weather events in other markets were likely to support the lift in forecast farmgate milk price.